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U.S. equities defied fears about the Greek elections by rallying more than 1% last week. The gains came as policy makers around the world reassured investors that they would supply liquidity if the markets tumbled in the wake of the Greek vote. The Dow rose 1.7%, or 213 points, to 12,767.17, its second consecutive week of gains. The S&P 500 jumped 17 points, or 1.3%, to 1342.84, and the Nasdaq added 14 points, to end at 2872.80. Stocks in the U.K., France, Germany, Spain and Italy also climbed Friday.

Regulators around the world made calming noises. Banking regulators indicated that they might let banks use a wider variety of assets, like gold or equities, to meet liquidity buffers, according to the Wall Street Journal. Speculation also grew that central banks around the world would conduct synchronized easing if necessary to calm the financial markets. And the Fed has a two-day meeting ending Wednesday, at which some expect it to extend the Operation Twist bond-buying program or restart quantitative easing.

"I'm putting a lot of faith in markets making politicians behave and make the tough decisions," says John Manley, chief equity strategist at Wells Fargo Advantage Funds, who expects the S&P 500 to remain in a trading range of 1250 to 1450. "This nonsense can't go on forever." Today's marketplace, he says, reminds him of the early 1980s, when the bond markets pushed yields ever higher, giving the Federal Reserve the political cover to fight inflation.

Charles Gave, GavKal Research's chairman, is downright optimistic about U.S. stocks. "We've been in a bear market for the best part of the last 12 years" due to the misallocation of capital, he says. China's currency controls, the Fed's artificially low interest rates and the creation of the euro have caused this misallocation, and it's about to end, he predicts. "If the euro disappears, it's fabulously good news. The markets will go down for two days and up for many years," Gave says. "We are witnessing the end of social democracy."

LATELY, THE HAPPENINGS at
Navistar InternationalNAV 0.05704506560182544%Navistar International Corp.U.S.: NYSEUSD17.54
0.010.05704506560182544%
/Date(1438376852224-0500)/
Volume (Delayed 15m)
:
1192092AFTER HOURSUSD17.54
%
Volume (Delayed 15m)
:
21314
P/E Ratio
N/AMarket Cap
1429527604.98138
Dividend Yield
N/ARev. per Employee
712078More quote details and news »NAVinYour ValueYour ChangeShort position
(NAV) seem to resemble those on a reality-TV show called Extreme Truck Driving, rather than the doings at a prosaic truck and engine maker. You can't believe what's happening. You're riveted to the tube. And you worry that it's going to end badly.

Last week, the U.S. Court of Appeals for the District of Columbia Circuit struck down a temporary Environmental Protection Agency rule that had allowed the Lisle, Ill., manufacturer to pay fines in order to continue selling Class-8 truck diesel engines that don't meet the latest pollution regulations, while working on engines that will. Its main competitors—the plaintiffs in the decision—already sell diesels that meet the standard. Navistar's cleaner engine will use a technology that differs from the rest of the industry's and that hasn't yet won EPA approval.

Navistar, while appealing the court decision, continues to ship Class 8 trucks—big 18-wheelers—with noncompliant engines. Meanwhile, the EPA is likely to issue a final regulation this year that might render the ruling moot.

At Friday's close of $29.95, Navistar was up sharply from a low of $20 on June 7, which followed credit downgrades and poor financial results. The stock jumped 7.62% Friday alone, after it was reported that MHR Fund Management, an activist investor, had bought a 13.6% stake in the previous two months. MHR joins Carl Icahn as a shareholder likely to push for change. And change appears to be needed.

In the company's fiscal second quarter, ended in April, revenue fell 2%, to $3.3 billion, and Navistar lost $172 million, or $2.50 per share. The truck maker blamed the loss partly on $10 million in EPA fines, and $104 million in warranty claims, following $112 million in claims in the previous quarter.

All this has happened even as Icahn began buying shares last year and upped his Navistar stake this month to 12% of the stock outstanding. Rumors flew last week that
Volkswagenvow.xe -0.07429420505200594%Volkswagen AG ADRU.S.: OTCUSD40.35
-0.03-0.07429420505200594%
/Date(1438381200000-0500)/
Volume (Delayed 15m)
:
169199AFTER HOURSUSD40.35
%
Volume (Delayed 15m)
:
169199
P/E Ratio
7.755737515857456Market Cap
96409529126.8605
Dividend Yield
2.695851301115242% Rev. per Employee
425642More quote details and news »vow.xeinYour ValueYour ChangeShort position
(VOW.Germany) or some other truck maker could be interested in a weakened Navistar.

The takeover rumors likely started because Navistar stock is down about 37% from its 2012 high of $47.42. But is it cheap enough? Maybe not at $29.95.

In its up-and-down profit history, Navistar has made as much as $5 a share, but that looks far off now. Applying a median historical price/earnings ratio of 10 times to its average yearly profit of $2 a share over the past decade produces a stock price of 20, well below the current level.

Yes, Icahn will apply pressure to management, but Navistar would have to slip into the low 20s to discount the myriad issues it faces. For one thing, its pension and retirement-benefit plans are underfunded by $3.2 billion. For another, the rising warranty outlays, for engines that have had to be repaired, indicate that buyers of its trucks are experiencing problems that won't enhance its reputation for quality and could hurt sales in the future.

Then there's the regulatory risk, and the market isn't good at handicapping government rulings. An EPA approval or temporary consent likely would send the stock soaring. But a denial would push it down even further. Navistar has said that 20%-25% of its total revenue is tied to Class 8 trucks, not all of which use the engines that are at risk.

Even if the EPA approves the noncompliant engine, Navistar will likely lose hundreds of millions in its U.S. engine business this year and next, says Goldman Sachs analyst Jerry Revich. There's downside to a base case value of $20 per share, he says, and upside to $35 if engine losses are eliminated via a sourcing agreement or through "alternative strategic action."

In the low 20s, Navistar would begin to discount all the significant risks facing it. But it might never fall that far if, say, the market rebounds sharply or a bidder does emerge. For the time being, however, Navistar looks cheap, but seems more speculation than investment. If you must watch a reality show with 18-wheelers, stick with Ice Road Truckers.

THANKS TO A SLOWING GLOBAL economy, spot crude prices have dropped about 25% since late February, to $83 per barrel. Oil-patch stocks, big and small, also have fallen, albeit by less.

Commodities prices are volatile, oil in particular, so when crude falls a bunch in a short period, it pays to look at the energy group's big, good-quality stocks with rising dividends, to see whether Mr. Market has given patient investors a long-term buying opportunity.

Price-to-earnings valuations for the biggest stocks in the group are depressed. (See the table above.) Exclude the lows reached during the 2008-early 2009 global financial crisis, and the shares are effectively near five-year lows.

Granted, these giant energy explorers have had production-growth issues for years—most are increasing annual output by only low single-digit percentages—and that's not likely to end tomorrow. Each has had its problems, like the 2010 Macondo disaster for
BP
(BP), but they are all strong companies, with the wherewithal to survive if times get even rougher than they are now.

Studies show that, over the long term, rising dividends produce the lion's share of total stock-market returns. The group offers juicy yields, averaging 4.3%—more than double the broad market's. And all but BP have produced a better total return than the market's over the past five years.

Those dividends are likely to continue to grow nicely over the next year or two. According to Markit, a market-data provider, the companies in the S&P 500 Energy Index, in the aggregate, are expected to raise dividends 13% this year and 10% next year.

Many investors expect crude-oil prices to continue to slide, obviously a negative for the group. But it takes a pretty pessimistic view of world growth to think that crude won't rebound in a year or two. When it does, so will these stocks, and, in the meantime, there are those cushy dividends.

Hope Floats

The Dow snagged its third gain in four weeks amid hope that central bankers will stabilize financial markets. The blue chips rose 213 points.